The Indian market began the New Year on a strong note. The Sensex ended at 19,580, up 154 points on Tuesday. The Nifty closed at 5,950, up 46 points.
In an interview to CNBC-TV18, Sudarshan Sukhani, s2analytics.com says the immediate target for the Nifty seems to be 6,030-6,040. "We should be buying the Nifty not just for an intraday trade, but for a much longer move," he adds.
Below is the edited transcript of his interview on CNBC-TV18.
Q: What is your target on the Nifty now?
A: I am assuming that traders are long. They should have come in yesterday with a long position or built one yesterday morning. We are now looking at a positional trade for the Nifty on the plus side.
We should be buying the Nifty not just for an intraday trade, but for a much longer move. We have had a four-week trading range. That has broken down decisively. January is a good seasonal month. So, I will not discuss the eventual targets for this upmove because that is not visible just now, but the immediate target for the Nifty seems to be 6,030-6,040.
The Nifty would still have more space to go up. Intraday targets are much more difficult. The key is to go with the momentum and stay long or build long positions. That itself will give the trader a big advantage.
Q: Pantaloon Retail is in your list of buys today?
A: It is surprising. Pantaloon was a disappointment for so many months and years and now it has crossed Rs 200, made the right chart patterns; it is embarking on its own bull market. After a big rally Pantaloon was in a trading range. It is now breaking out. It is a momentum stock, high beta play and a stock that has built a base and is now coming out of it. So it qualifies as a buying opportunity in all aspects. We are buying it today because the breakout is imminent. It has already started that yesterday and I am assuming it will build onto it. Once a stock breaks out then there is a strong momentum play on the upside till it begins another new range. That could take sometime.
Q: Do you think Rural Electrification Corporation (REC) should also outperform the Nifty?
A: At least today. Rural Electrification Corporation made a trading range. It is on the verge of a breakout. It actually closed higher than the resistance levels yesterday and that suggests that it is a same story as in Pantaloon; big rally, trading range as was in the Nifty. The Nifty broke out yesterday and naturally some stocks will follow on the subsequent days, which is what is likely to happen today. So REC is an excellent play. The stock chart was very good by itself, built a base and came out of it and today specifically I think intraday traders should focus on this stock. If it closes strong, carry it. There is a big move upcoming here.
Q: You are cautious on the IT bunch though. You are selling Tech Mahindra?
A: Yes. The midcap IT has been disappointing in any case. I have been upbeat on the largecap IT, which is what the CNX-IT consists of. The midcap IT was generally disappointing.
Tech Mahindra had a big decline, a small rally and then it started turning down. So that small rally faced resistance at an earlier resistance level. It is also telling us that that was a bear market rally in an outgoing downtrend. It actually is losing points in a time when the Nifty is moving up. It is a short sell. It is in the Futures & Options (F&O) segment that is why the short sell is possible. I think independently and as a hedge it is worth looking at it.
Q: You are also selling MphasiS?
A: Yes, the charts for MphasiS are worst than Tech Mahindra. Tech Mahindra at least had a rally. MphasiS had nothing except for one big day, nothing happened to the stock. It is at the lower end of its chart. Whenever we make a chart we notice that the price of MphasiS is at the end, the downside. It is now breaking down from a trading range on the downside. There is a story and a theme in the midcap IT which is saying this is not a sector to be in. MphasiS is in the F&O segment, consider going short in it.
Q: What about SREI Infrastructure Finance from the infrastructure lot which has also been outperforming the last few days?
A: We picked it up when it was Rs 32 and then it had already rallied 30 percent, but that is how the stocks are picked up. It had a small correction after reaching Rs 48-49. So this is a classic buy on dips opportunity. That correction has stopped at an earlier moving average, at an earlier support level. The stock yesterday showed signs of strength. The first target for this should be the earlier highs of Rs 49 and eventually it will cross it.
Q: You have a bullish call on Zee Entertainment today?
A: We have been bullish on Zee since it embarked on its uptrend or bull market. The stock goes up, corrects, sometimes consolidates, again it had went up and a small correction in Zee is over. That correction took the shape of a consolidation, of a trading range. A lot of stocks did that because the Nifty was doing it. Some of them broke out yesterday with the Nifty. Some are likely to do that today, tomorrow or in the subsequent days and Zee is likely to be one of the outperformers again. A stock that outperforms does not suddenly stop, especially when it is not overbought on a long-term chart.
Q: Would you change your markers around for the Nifty? 5,980 is the pre-opening close?
A: No. It makes no difference. The fact is that the Nifty had a breakout yesterday. The close itself suggested that the breakout levels are being respected and maintained and today we are opening higher. So there is sufficient follow-through to tell that the breakout is genuine. After all the markets will do what they want, but traders have to follow some basic rules and this is a fundamental rule or rather a pure technical rule that you follow the breakout. I would not change the markers. The immediate targets for the Nifty are about 6,030-6,040. That is the first leg. We will see what happens, but usually when you see an uptrend, a trading range and then a subsequent upmove, that suggests that there is sufficient steam ahead to go much higher. We will find out.
Q: What kind of targets would you keep on Reliance Infrastructure?
A: A quick target of Rs 560 is there and something is happening and as I have explained earlier also that the entire Anil Dhirubhai Ambani Group (ADAG) is having some ripples, some momentum play, something interesting. So traders should be looking at Reliance Infra, Reliance Communications and Reliance Capital to go long. After yesterday’s big move, wait patiently, but the trade is still there.
Q: What about the midcap Indian Overseas Bank (IOB)?
A: IOB is part of public sector undertaking (PSU) banking group that should be doing well. This is not the end of the PSU bank rally. We are going to see much higher levels. So an immediate target of Rs 95 is possible and probably much more. But IOB is not the best of the PSU banks. The bests are Punjab National Bank (PNB), Bank of Baroda, Canara Bank. It is just a matter of difference, but qualitatively I would say they are the best tradable instruments.
Q: How about GMR Infrastructure technically?
A: The surprise is that GMR is now making some kind of a bottoming out pattern and suggesting that there is a possibility of an upmove. The problem is that you really do not want to trade GMR on the long side or on the short side. There is so much of a story there, so much news driven moments that it is not a wise idea. So technically the answer is it is suggesting that higher levels are coming.
Q: How would you trade something like OnMobile Global?
A: One would actually buy it, but it is a very volatile stock. It falls very sharply and then rallies equally sharply. So it is not a very good instrument as a proper trading idea. But purely again on charts it has seen a very big rally yesterday. It is now pushing against resistance that is Rs 48-49. Once it crosses that it is looking at Rs 55. So if somebody understands this stock and is prepared for the volatility, there is a 10 percent target ahead.
Q: What about Sintex Industries from the midcap basket which also made a move yesterday?
A: Sintex is a good chart. It is not confirm, but it is just completing a bullish head and shoulder pattern. That is usually the sign that the stock is bottoming out, a major reversal is coming in place and a new uptrending or a new bull market is coming. This whole process will take its own time, but because it is a high beta play an immediate target of Rs 60 is possible. I would suggest Sintex as a trading idea for the day and for the next 2-3 days.
Q: What about DLF from real estate?
A: Yes, we have been tracking DLF since the first breakouts at Rs 200 and it is doing all the right things. It made the right chart patterns, took it at the first step ahead and now rallies, consolidation, small dips, subsequent rallies, again we saw a rally yesterday. That rally has come after a four week consolidation, almost mimicking the Nifty. So yesterday is not a one-off event, it is just the beginning of what is likely to be a sustained upmove. So DLF is a buying opportunity. Position traders can buy Calls, Futures or equity.
Disclosure: I have no holdings in the stocks discussed.